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Macroeconomic Stabilization, Monetary-Fiscal Interactions, and Europe's Monetary Union

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Listed:
  • Corsetti, Giancarlo
  • Dedola, Luca
  • Jarocinski, Marek
  • Mackowiak, Bartosz Adam
  • Schmidt, Sebastian

Abstract

The euro area recently experienced a prolonged period of weak economic activity and very low inflation. This paper reviews models of business cycle stabilization with an eye to formulating lessons for policy in the euro area. According to standard models, after a large recessionary shock accommodative monetary and fiscal policy together may be necessary to stabilize economic activity and inflation. The paper describes practical ways for the euro area to be able to implement an effective monetary-fiscal policy mix.

Suggested Citation

  • Corsetti, Giancarlo & Dedola, Luca & Jarocinski, Marek & Mackowiak, Bartosz Adam & Schmidt, Sebastian, 2017. "Macroeconomic Stabilization, Monetary-Fiscal Interactions, and Europe's Monetary Union," CEPR Discussion Papers 12371, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:12371
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    Cited by:

    1. Athanasios Orphanides, 2017. "The Fiscal-Monetary Policy Mix in the Euro Area: Challenges at the Zero Lower Bound," European Economy - Discussion Papers 2015 - 060, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    2. Bartosz Mackowiak & Marek Jarocinski, 2017. "Monetary-Fiscal Interactions and the Euro Area’s Malaise," NBER Chapters,in: NBER International Seminar on Macroeconomics 2017 National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    eurobond; Government bonds; Joint Analysis of Fiscal and Monetary Policy; Lower Bound on Nominal Interest Rates; Self-Fulfilling Sovereign Default;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

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